Dujovne, Lagarde announce deal extending financial institution's support by a further US$7 billion, extending total commitment to US$57.1 billion.
Argentina and the International Monetary Fund have agreed a deal that extends the financial institution's support by a further US$7 billion, extending its total commitment to US$57.1 billion.
The agreement – which had been trailed by the government for the last 24 hours since the resignation of Luis Caputo from the presidency of the Central Bank – was presented by Finance Minister Nicolás Dujovne and IMF Managing Director Christine Lagarde in New York this evening.
Despite repeated denials from government ministers in recent weeks, the two parties eventually agreed to extend the amount involved in the loan. The agreement "will allow our country to leave behind the turbulent path of recent months," said Dujovne
Lagarde, seated alongside Dujovne, told the press that "every effort is being made to stabilise [Argentina's] economy" and said the loan was designed to help the country "face its challenges" and support the most vulnerable sectors of the population. She said she intended to send the new loan agreement to the IMF's board for approval "as soon as possible," addressing the Argentine reporters at the event in Spanish.
"The Central Bank of Argentina has decided to adopt a floating exchange rate regime without intervention. In the event of extreme overshooting of the exchange rate, the [bank] may conduct limited intervention in foreign exchange markets to prevent disorderly market conditions," she added.
Dujovne said that the agreement "will be supported by an adequate and sustainable budget and without intervention in the foreign exchange market."
These funds "no longer have a precautionary nature but may be fully utilised [as necessary]," the minister added.
Explaining the agreement, Dujovne admitted that Argentina had faced "very volatile days." But he said the government would "maintain our commitment to a flexible exchange rate."
"Argentina and the IMF have reached a new agreement to strengthen the 36-month Stand-By Program (SBA) approved on June 20," the Finance Ministry said in a statement confirming the deal. "The new agreement includes total disbursements worth US$57.1 billion, which represents an increase of US$7.1 billion with respect to the previous agreement."
The new deal "front loads IMF financing," the fund said in a statement, increasing by US$19 billion the amount due to be made available up to the end of 2019.
As the duo finished their press conference in the US, the new president of the Central Bank, Guido Sandleris, was due to host his own event with the press in Buenos Aires, where he would provide further details and outline his plan to tackle inflation.
Speaking on Tuesday in New York, both Lagarde and Macri had said a deal was imminent, with the IMF chief describing talks as "close to the finish line."
This morning, after his return from the United States, President Macri hosted a Cabinet meeting at the Olivos presidential residence, where Security Minister Patricia Bullrich confirmed the deal would be announced later the same day.
As markets awaited news of the announcement earlier today, the peso fell 1.19 percent against the dollar, closing at 39.45 pesos.
The IMF and the Macri administration first agreed on a three-year, US$50-billion rescue lending programme back in June, as a currency crisis sent the peso plunging against the dollar. In the wake of continuing economic challenges and the wider global crisis facing emerging markets, the government subsequently requested a more rapid disbursement, as it seeks to restore investor confidence and ease concerns that Argentina will not be able to meet its debt obligations next year.
Buenos Aires had already received a US$15-billion disbursement but any changes in the programme require the approval of the IMF board.
On Tuesday, as a general strike shut down Argentina, onlookers were shocked when Caputo resigned his post at the Central Bank for "personal reasons," with a statement detailing his apparent conviction that a "new agreement with the International Monetary Fund will restore confidence in the fiscal, financial, monetary and exchange situation."
Formerly chief of trading at JP Morgan and Deutsche Bank, Caputo is close to President Macri and was finance minister before he was appointed president of the financial institution back in June. However, in the last 24 hours reports have emerged of tension between Caputo and Dujovne, with some saying their relationship was extremely strained.
Sandleris, Caputo's replacement at the helm of the Central Bank, is an economist who worked previously for the World Bank and the Inter-American Development Bank. He was deputy finance minister before being named Central Bank president. He was given a glowing reference by Dujovne on Tuesday, who called him "a brilliant person" with whom Argentina would "start to win the battle with inflation."
Inflation is expected to hit 40 percent by the end of the year while the economy is predicted to shrink by two percent.
Frigerio: Deal doesn't modify budget
Speaking earlier in the day, Interior Minister Rogelio Frigerio said that the new agreement "does not modify any of the macroeconomic variables that are under discussion in the Budget."
Defending the 2019 Budget package while taking questions from opposition lawmakers on the lower house's Budget and Finance Committee, Frigelio said the government "went to the IMF with our macroeconomic guidelines and projections and this is what the IMF accepted."
The government's 2019 Budget proposal sees inflation coming in at 23 percent for 2019, with an average exchange rate of 40.1 pesos per US dollar.
Tens of thousands joined in a nationwide strike Tuesday to protest Macri's handling of the economic turmoil and his decision to turn to the IMF for help. Many Argentines blame the institution for encouraging policies that led to the country's worst economic crisis in 2001. It resulted in one of every five Argentines being unemployed and millions sliding into poverty.
The IMF has admitted it made a string of mistakes that contributed to the economic implosion. A 2004 report by the IMF's internal audit unit concluded it failed to provide enough supervision and overestimated growth and the success of economic reforms, while it continued to lend Argentina money when its debt burden had turned unsustainable.
"The IMF did not press the authorities for a fundamental change in the policy regime and in December 2001 effectively cut off financial support to Argentina," the report said.
Without further IMF support, the government was forced to declare a record US$100-billion sovereign debt default.